Tesla Shares Jump on Full Self-Driving Milestone in China

Tesla (NASDAQ:TSLA) shares rose on Monday (April 29) morning following the announcement that Chinese authorities have approved the company’s advanced driver-assistance technology.

The company was up 11.88 percent from Friday’s (April 26) close at US$188.29 as of the opening bell.

CEO Elon Musk made a surprise trip to China over the weekend as the Beijing auto show ended. Soon after his landing, news broke that the company’s advanced driver-assistance technology has successfully met China’s strict data security requirements, leading to the removal of previously placed Tesla car restrictions that prohibited the use of cameras and sensors and restricted over-the-air Tesla updates.

This development has fueled expectations that Full Self-Driving (FSD) could soon be available in China.

Due to concerns that built-in cameras could collect sensitive information, Chinese officials had banned Tesla vehicles on certain government properties. However, Musk’s meetings, which included a sit-down with Chinese Premier Li Qiang on Sunday (April 28), apparently appeased officials, who also approved new energy vehicle models from Chinese-owned BYD (HKEX:1211), Lotus (NASDAQ:LOT), Nezha, Li Auto (NASDAQ:LI) and Nio (NYSE:NIO).

Tesla has reportedly also signed a deal with Baidu (NASDAQ:BIDU), China’s most widely used search engine, that would grant Tesla access to Baidu’s mapping and navigation technology for FSD, further solidifying its position in the market.

Tesla’s FSD system is classified as a Level 2 driver-assistance system, which means that although it can handle some aspects of driving, the driver must remain attentive and prepared to take control at any moment.

FSD is an upgrade to Tesla’s Autopilot driver-assistance system, which primarily focuses on maintaining the vehicle’s speed and lane positioning. FSD expands upon these capabilities with more complex features, such as automatic lane changing, intersection navigation and object recognition. The technology has been offered in China since September 2020, but with limits on features such as automated lane changing and adaptive cruise control.

In the US, FSD is currently undergoing beta testing, with users providing feedback to refine the system. Tesla’s Autopilot features have been subject to scrutiny, and just last week safety regulators opened an investigation into whether new safeguards installed during Tesla's December recall of more than 2 million cars are enough to address safety concerns following a series of crashes. It has since been reported that Autopilot was linked to at least 200 crashes and 29 fatalities.

Tesla’s recent breakthrough in China could provide a much-needed boost for the carmaker, as it has been facing stiff competition from local EV manufacturers. Its sales in China have been declining as new competitors enter the market, prompting the carmaker to pursue strategies such as price cuts in an attempt to regain market share. The introduction of FSD could be a significant differentiation factor for Tesla, setting it apart from Chinese EV manufacturers.

The approval of Tesla’s technology in China comes after the company’s Q1 earnings call last week, which revealed a 9 percent drop in revenue and 22 percent fewer car sales than the previous year, Tesla’s biggest annual drop since 2012.

Tesla shares closed Monday at US$194.05.

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Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.